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Multi-Asset ETFs for Uncertain Markets

Sanghamitra Saha

Though the broader market is in decent shape and a rebound in global economies is making investors enthusiastic, geopolitical tensions and some downbeat U.S. economic data are still rearing their ugly heads.

Still-sluggish inflation figures, worries in the oil patch and occasional political gridlocks that are coming in the way of Trump’s proposed reforms are concerns. The IMF too lowered the growth forecast for the U.S. thanks to doubts over President Trump's ability to deliver on his pro-growth promises. The agency has downgraded U.S. growth to 2.1% for 2017 and 2018 from the previous projections of 2.3% and 2.5%, respectively (read: ETF Winners & Losers on IMF Growth Forecast).

Lower-than-expected expansion in the fiscal policy given the ongoing political drama prompted the IMF to go for a downgrade. Major proposed reforms like the health care bill, tax cuts and defense budget increase are still way behind the enactment. Plus, Trump’s inclination toward protectionism is another threat to the U.S.

Plus, incendiary rhetoric between U.S. president Trump and north Korea’s Kim Jong-un flared up volatility levels considerably this month. Though odds of a war are pretty low, volatility levels shot up with iPath S&P 500 VIX ST Futures ETN VXX gaining about 10.3% in the last one month (as of August 11, 2017) (read: 4 ETF Ways to Hedge Against Volatility).

Investors should note that U.S. Treasury yields remained at low levels despite two rate hikes this year. On August 11, 2017, the U.S. benchmark Treasury yield was 2.19%.

If Stocks Are Overvalued What About U.S. Treasuries?

Against this backdrop, stocks are being blamed of overvaluation concerns. As per Bloomberg, bond market too appears pricey at the current level. As a result, diversification may earn investors some surety in terms of returns with lower risks. Thankfully, there are some multi-asset ETF products, which can help investors overcome these challenges.

Notably, the multi asset strategy looks to boost returns and lower overall volatility in the portfolio. These products normally provide a high level of current income and shun downside risks of a specific asset class. These products cater to various asset classes (equity, fixed income, and alternative securities), which have low correlation to each other.

Below we highlight a few multi-asset ETFs that could offer investors great returns in the form of capital appreciation and income.

YieldShares High Income ETF YYY

This fund yields about 8.96% annually. The fund holds 30 closed-end funds ranked the highest by the ISE on the basis of three criteria namely fund yield, discount to net asset value and liquidity. Around 75% of the fund is targeted at debt securities while the rest are in equities (read: High Income ETFs Worth Their High Costs).

Arrow Dow Jones Global Yield ETF GYLD

This fund provides almost equal-weight exposure across five global areas — equities, real estate, alternatives, sovereign debt, and corporate debt. This is easily done by tracking the Dow Jones Global Composite Yield Index. The ETF puts 20% each in the five categories with each security holding less than 1% of total assets. This ensures that the product is well diversified among 150 securities with an annual dividend yield of 6.80% (read: 5 Red Hot Dividend ETFs Yielding 5% or More).

iShares Morningstar Multi-Asset Income ETF IYLD

The fund looks to track the investment results of an index composed of underlying equity, fixed income and other income funds that collectively seek to deliver high current income while providing an opportunity for capital appreciation. The product yields about 4.63% annually. The U.S. takes the top spot with 68.14% allocation followed by 3.7% in U.K. and 2.2% in Canada.

WBI Tactical Income Shares WBII

The fund targets optimal blend of bear market capital preservation & bull market return. It is actively managed. It invests in income-producing debt & equity securities of foreign & domestic companies.The product yields about 1.68% annually.

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YLD SHS-HI INC (YYY): ETF Research Reports
IPATH-SP5 VX ST (VXX): ETF Research Reports
ISHARS-MO MA (IYLD): ETF Research Reports
ARROW-DJ GL YLD (GYLD): ETF Research Reports
GLBL-X PERMNT (PERM): ETF Research Reports
WBI-TAC INC SH (WBII): ETF Research Reports
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